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HORIZON 2020

Vestnik


ԲԲ ̲ ˲

UDC 330.13

THE THEORETICAL ASPECT OF PROFIT
AND PROFITABILITY ANALYSIS


Nijole Gedviliene
Marijampole college (Marijampole, Lithuania)
E-mail: nijole.gedviliene@mkolegija.lt, ORCID: 0000-0002-0291-0396
Virginija Giliuviene
Marijampole college, (Marijampole, Lithuania)
E-mail: virginija.giliuviene@mkolegija.lt, ORCID: 0000-0001-7201-6237

Abstract. The company's profit and profitability are one of the most important criteria for assessing the
enterprise performance. According to the achieved results of profit and profitability, it is being judged what
benefits may receive different interest groups of the company - owners, employees, investors and creditors.
All business enterprises are concerned to increase the profitability. The article analyses the theoretical
aspects of profit and profitability assessment. The analysis of scientific literature of foreign and Lithuanian
authors suggests that the company's profitability analysis helps to determine the financial aspects of the
company's financial performance, to assess the current situation in order to make appropriate management
decisions. The company's profit and profitability are one of the most important criteria for assessing the
enterprise performance. According to the achieved results of profit and profitability, it is being judged what
benefits may receive different interest groups of the company - owners, employees, investors and creditors.
All business enterprises are concerned to increase the profitability. The article analyses the theoretical
aspects of profit and profitability assessmentWhile assessing companys activity efficiency in various
aspects, its competitiveness and growth possibilities, it is not enough to analyse absolute profit indices and
based on them to take particular decisions, because an absolute profit index does not reflect companys real
financial situation. More comprehensive information is obtained by calculating relative profitability indices
and comparing them with profitability. Besides, profitability indices in a structured form provide to
companys managers the most important and most precise information in form of indicators based on which
there is a possibility to assess companys financial situation and to forecast companys future financial
situation, foresee activitys success and failures. Therefore, even a profitable company needs a constant
analysis of these indices, their dynamics, affecting factors, because due to affecting factors the companys
managers can assess and forecast profitability indices. In search for the ways how to increase a profit and
profitability indices, it is very relevant for the companys managers to assess introduction of new services to
a market, because new implemented services reach a success, the companys managers can take decisions,
determining dynamics of development of profitability indices, and direct companys management towards
profitable direction.The article analyses the theoretical aspects of profit and profitability assessment. The
analysis of scientific literature of foreign and Lithuanian authors suggests that the company's profitability
analysis helps to determine the financial aspects of the company's financial performance, to assess the
current situation in order to make appropriate management decisions
Keywords: profit, profitability, relative indicators of profitability.

THE THEORETICAL ASPECT OF PROFIT AND PROFITABILITY ANALYSIS



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